Re: Why ESOP?

["David Spitzley" <dspitzle@gw.wash.k12.mi.us>]

>>> <Dellerman@worldbank.org> 10/21/99 04:29PM >>>
This should give one pause when interpreting a quarter-century or more of 
ESOP rhetoric from Kelsoites and others.  I am in general a great fan of 
underground and crank economics, but there are some limits.

-------------------------------

I hope this doesn't sound like an attack, because it isn't meant as one, but 
what form has your exposure to Kelso's ideas taken?  Specifically, have you 
you had the opportunity to read any of his books (the Capitalist Manifesto 
being the best, to my mind), or have you been exposed to his ideas mainly 
during verbal assaults by his supporters?  Speaking as a supporter myself, I 
can't help thinking that the method of presentation of Kelso's ideas has 
been the main impediment to meaningful debate on the subject.


In any case, whatever flaws existing ESOP policies may have, and 
whatever excessive claims may have been made in their favor at times, 
Kelso's central premise can be summed up very simply

1.  Highly concentrated ownership of capital, whether private or state 
ownership, is A Bad Thing for a democratic society.

2.  The primary tool for the acquisition of capital is access to credit; access 
to capital credit is generally restricted to those who already own capital with 
which to collateralize additional loans.

3.  Any rationally approved loan for capital acquisition will be repayable out 
of the earnings from the acquired capital; thus, there is no practical reason 
to restrict capital credit to those who already own capital if other means of 
insuring against loan default can be found.

     Conclusion:  Broadening the ownership of capital should be a public
     policy objective, and the most efficient means of doing so is to make 
     access to capital credit broadly available.

ESOPs were just Kelso's attempt to apply his conclusions.  They are 
emphatically not the only logical approach to doing so, nor is the current 
implementation of ESOPs in US law necessarily flawless (many of Kelso's most 
aggressive supporters would say it is not).  In any case, I have trouble
understanding what makes these ideas "crank economics"; underground
they may be, but I've done my own poking around into the cranks, and 
Kelso's ideas were unusual in that a) they were coherent, b) they could be 
implemented in steps smaller than wholesale revolution, and c) they count on 
human beings behaving more or less the way they always have.

If there is in fact something crackpotty in my description of Kelso's ideas
above, I would appreciate it if you would explain where the flaw is; so far 
your paper on ESOPs is the first significant critique of Kelsonian ideas I've 
seen, and I waded through 40 years of the Citation Index trying to find some, 
so I'm interested in your take on things.